Excel is the most widely used tool for dealing with massive datasets. We can perform myriads of tasks of multiple dimensions in Excel. Excel has made life easier for people of all professions. It has become a part and parcel of an accountant’s life. He or she can easily create a chart of accounts in Excel. In this article, I will show you how to create a chart of accounts for a construction company in Excel.
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Introduction to Chart of Accounts
A Chart of Accounts (COA) is an accounting tool that includes all the accounts that an organization uses in the ledger. These accounts are divided into sub-categories in a Chart of Accounts.
Every organization traces its financial transaction in the record book. For smooth business operation, this is mandatory. While keeping records, the accountants use the Chart of Accounts.
5 Steps to Create Chart of Accounts for Construction Company in Excel
We are going to create a chart of accounts for a construction company now. Here, all the accounts related to the business of a construction company will be listed based on subcategories. So, let’s do it step by step.
Step 1: Prepare a List of Assets
An Asset is a resource that an organization will consume over time to get a future benefit. Organizations use assets to generate revenues and get benefitted.
Assets are of 2 types. They are Current Assets and Long-Term Assets.
Current Assets are all the assets that a company is going to consume in its business operations within one year.
- Current Assets include cash, accounts receivable, etc.
Long-Term Assets have a life span of several years. These are less liquid, which means they do not liquidate into cash easily and frequently
- Long-Term Assets include Land, Buildings, Vehicles, etc.
Step 2: Make a List of Liabilities
In Accounting, Liabilities are the obligations that an organization has to pay to a business entity. Generally, organizations pay liabilities by consuming their assets or generating revenues.
Similar to Assets, Liabilities are of 2 types. They are Current Liabilities and Long Term Liabilities.
Current Liabilities are the liabilities an organization has to pay within one year.
- These include Accounts Payable, Notes Payable, etc.
Long-Term Liabilities are the liabilities an organization has to pay over one year.
- These include Bonds Payable, Long-Term Loans, etc.
Step 3: Create a List of Revenues
In accounting, Revenue is the value of all goods and services an organization has provided in an accounting period. Generally, the accounting period is 1 year. Revenues are not only the money that an organization generates.
- Revenues include Sales Revenue, Service Revenue, etc.
Step 4: List Out Accounts Under Expenses
To operate a business and generate revenues, every company incurs some cost. These costs are Expenses.
- Expenses include material costs, equipment costs, salaries and wages, office rent, etc.
Step 5: Prepare a List of Equity Accounts
Equity (also known as Owner’s Equity) is the owner’s or shareholder’s contribution to the company. It includes the investments made by the owners plus any retained earnings over time.
- Equity includes Capital Stock, Retained Earnings, etc.
Things to Remember
- Chart of Accounts varies from one organization to another.
- Account Numbers are used for reference purposes.
In this article, I have explained how to create a chart of accounts for a construction company in Excel. I hope it helps everyone. If you have any suggestions, ideas, or feedback, please feel free to comment below. Please visit Exceldemy for more useful articles like this.